You may know many landlords and jump at the chance to purchase a property to rent out. However, there are many important things to understand and consider before doing so. The following few points will help you better understand the things involved in this process.
Keep on top of your landlord finances
Although the most basic idea is that becoming a landlord will create a steady cash flow and tangible assets, there are many costs associated with being a landlord. It can be tricky to keep on top of the cash flow and liabilities. It is important to have accountants such as TaxKings that work directly with landlords, which will help keep you on top of things for you.
If you earn up to £2,500 on your property annually, you must contact HMRC. For-profits between £2,500 to £9,999 annually after your allowable expenses, you must fill out a tax return. Particularly, if this is your first time acting as a landlord, you should work with an accountant to keep you on the right track. There are many financial steps involved in the landlord process, so keeping on top of everything is important.
You will also be allowed to have tax-deductible costs as expenses that you can deduct from your taxes. These include legal, accounting or letting agent fees, building or content insurance and maintenance or repair costs. There is also tax relief available for replacing domestic goods such as beds for your tenants; however, this does not apply to any improvements to the property, such as bathroom renovations.
If you decide to rent your property through an agency, there will be fees associated with this method. This will mean that you will not be directly in contact with your tenants. Instead, the agency will deal with any issues on your behalf.
Your responsibilities as a landlord
Many responsibilities entail being a landlord. Maintaining your property to ensure that it fits human habitation is important. You must ensure that any appliances and furniture you provide are in good working order. It will be your responsibility to replace anything damaged or not working properly. You are also required by law to provide smoke detectors and carbon monoxide detectors for the property.
A further legal requirement is having an Energy performance certificate (EPC) for the property, providing information regarding the property’s energy efficiency. Alongside a gas safety certificate for any cookers or central heating.
There are other compliances to consider for your property, such as a House in Multiple Occupation (HMO) licence, which translates as a licence for a property with three or more unrelated people living together if you decide to rent the property to students, for example.
Importance of finding the right tenant
Finding the right tenant can be tricky as some tenants may be difficult to deal with. Many horror stories surround tenants destroying the property they are renting or simply refusing to pay rent. For this reason, it is important to have your due diligence regarding prospective tenant background checks and tenant screening.
It is important to check that your tenants can afford the price of the rent you have set, which is why you are entitled to ask prospective tenants to provide proof of earnings. Checking whether prospective tenants already have any pets is also important as there may be a potential that your property may experience wear and tear more quickly if you decide to choose them.
Asking for references from previous landlords and employers is a good way to carry out a character check on your prospective tenant to ensure that they will not cause you any problems.
Due to the Equality Act 2010, you cannot unlawfully discriminate against individuals based on characteristics such as race, religion, gender, sexuality or disability in relation to refuse rental. Therefore any of these reasons will not stand when refusing to take a tenant on. However, you may have a reason if their background check, particularly regarding any financial issues, flags anything negative or suspicious such as rent arrears.
Most importantly, it would help to keep your tenants happy. Although your tenants have a responsibility to make rent payments and keep in contact with you regarding any problems with the property, it is your responsibility to be a good landlord.
A happy tenant will make the process an easy experience and potentially stay in your property longer, saving you from finding new tenants. Avoiding the tenant hunting process will save you money as the property will not be vacant for potentially long periods.
Ensure you respond to your tenants’ messages promptly and fix any repairs they may need to be sorted. By being flexible with your tenants, say they request to have a pet or to repaint a room, you can ensure that you do not provide them with a reason to leave. Great tenants can make the difference between you experiencing an easy situation and a nightmare scenario.
